India's external trade landscape in FY25 presented a complex narrative of record-breaking achievements alongside significant geopolitical and policy challenges. The year began with optimism for expanding bilateral agreements and enhanced market access, particularly with the United States, but unfolded against a backdrop of global conflicts, shifting trade policies, and renewed protectionism that tested the resilience of Indian exporters.

Record Export Performance Despite Global Headwinds

India achieved record exports of $825.25 billion in FY25 with a 6.05% growth rate, demonstrating remarkable strength despite multiple global disruptions. The ongoing Russia-Ukraine war and Israel-Gaza conflict significantly disrupted global supply chains, while sanctions on Russia and heightened tensions in the Red Sea pushed up freight and insurance costs for exporters across various sectors.

Escalating US Trade Tensions and Tariff Challenges

The trade relationship with the United States became increasingly strained throughout FY25. The US unveiled global tariffs with a baseline rate of 10% across imports, alongside reciprocal tariffs targeting select countries. India faced a particularly steep 26% tariff, raising significant concerns across export-oriented sectors, though reciprocal tariffs were initially paused for 90 days to allow negotiation space.

The situation deteriorated further when the US doubled tariffs on Indian goods to 50%. Commerce Minister Piyush Goyal responded firmly, stating that India would not accept external pressure on its sovereign trade decisions and emphasizing that sourcing choices were matters for the global community rather than unilateral decisions.

Strategic Trade Diversification Initiatives

Away from US trade tensions, India made substantial progress in diversifying its trade partnerships through multiple bilateral agreements. India signed a free trade agreement with the UK, though operationalization remains pending. The FTA with the European Free Trade Association, comprising Switzerland, Norway, Iceland, and Liechtenstein, came into force, opening new opportunities for Indian exporters across these developed markets.

India concluded negotiations for a Comprehensive Economic Partnership Agreement with Oman, granting duty-free access to over 98% of Omani tariff lines and covering nearly all Indian exports to the country. Most recently, India completed negotiations for an FTA with New Zealand, further expanding its network of preferential trade arrangements.

Key Export Performance Drivers

Several sectors led growth in exports:

• Electronics: Emerged as a key growth driver
• Engineering goods: Maintained strong performance
• Pharmaceuticals: Continued robust export growth
• Marine products: Showed significant expansion
• Rice: Contributed substantially to agricultural exports

Key destination markets included Spain, Hong Kong, China, and the UAE, which emerged as particularly strong markets for Indian exporters.

Government Policy Response and Support Measures

The government implemented several policy measures to support exporters facing global challenges. The Export Credit Guarantee Corporation upgraded country risk ratings for 24 nations, effectively lowering insurance costs and reducing exposure to volatile markets. Currency depreciation provided natural relief to exporters, while GST rate rationalization offered additional domestic support.

The newly announced export promotion mission, specifically aimed at incentivizing market diversification, is expected to play a crucial role in supporting exporters in the coming months.

Ongoing Negotiations and Future Outlook

As negotiations with the US continue, officials maintain cautious expectations about immediate breakthroughs. Commerce Secretary Rajesh Agrawal has emphasized that discussions with the US remain complex and multi-layered, involving both a comprehensive bilateral trade agreement and a parallel framework deal to address reciprocal tariff challenges.

Beyond the US relationship, India is actively pursuing negotiations with multiple partners including the European Union, the Eurasian Economic Union, MERCOSUR, Chile, Peru, and the Maldives. Reviews are underway for the ASEAN FTA, while expanded agreements are being explored with Australia and the UAE. Terms of reference have been finalized for potential deals with Israel, Qatar, and the Gulf Cooperation Council, representing significant potential for further trade expansion and diversification.

Recent reports highlighting ongoing trade negotiations between India and the United States indicate that India has not provided market access to US agricultural products under the Bilateral Trade Agreement (BTA).

Current Trade Agreement Status

The absence of agricultural market access provisions in the BTA reflects the complex nature of India-US trade relations. Agricultural trade has historically been a sensitive area in bilateral negotiations, with both countries maintaining specific policies to protect their domestic farming sectors.

Implications for Bilateral Relations

This development may influence future trade discussions between India and the United States. Agricultural products represent a substantial portion of US exports, and market access to India's large consumer base has been a key negotiating point in previous trade talks.

Trade Agreement Framework

The BTA framework typically encompasses various sectors and trade facilitation measures. However, the exclusion of US agricultural market access suggests that this particular sector may require separate negotiations or additional agreements to address the concerns of both nations.

The current status indicates that both countries may need to engage in further discussions to resolve agricultural trade issues and potentially expand the scope of their bilateral trade relationship.